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When to Sell a Stock

Many investors find it difficult to judge when the right time has come to sell a particular stock. Besides the personal reasons that may guide your decision there are times when the market requires you to sell a stock.

Some examples of market reasons for selling a stock would be:

A decrease in the price of the stock

  • When the stock drops

    If you trader, which means that you are interested in short-term profits, a drop in the price of a stock by a particular percent means that you should sell the stock. When you have bought the stock you have set a floor for the stock, which typically ranges from 6% to 8% from the current price. If this range is passed it is better to sell the stock and minimize the losses.

  • When the stock is expected to drop

    It is possible for the value of the stock to be inflated. This means that the price of the stock is about to fall. If your stock is experiencing this, it is time to sell it and wait for the correction of the market to move the price down. When this happens you can again purchase the stock, but only if you still consider it a profitable investment.

    On the other hand, this tactic requires a good knowledge and feeling of when the price of a stock has reached its peak and is about to fall. Additionally, it is always better to sell a stock that is overvalued than purchasing such.

A fundamental change in the company that has issued the stock

A new CEO may change the company's direction drastically. As a result you may end up with a company that greatly differs from what it was initially. If you have bought the company's stock because of the company's mission and activities, it may be time to sell the stock. Before embarking on the selling, you should make a careful research to see whether the change in the company will have a negative impact on the performance of your stocks.

These are only some of the market reasons for selling a stock. No matter what reasons you hold, carefully consider the costs you will incur from the selling of the stocks. These may include taxes, transaction costs, fees and many others that may greatly decrease your profits.

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